Pre-distribution and the role of collective bargaining

In his speech to yesterday’s Policy Network conference, ‘The Quest for Growth’, Ed Miliband introduced the concept of ‘pre-distribution’. Recognising that a Labour Government in 2015 would seek to pursue social democratic outcomes without recourse to tax and spend, he argued that instead of redistributing resources, Labour should ensure that they are distributed properly in the first place.

To quote Ed directly:

“The redistribution of the last Labour government relied on revenue which the next Labour government will not enjoy. The option of simply increasing tax credits in the way we did before will not be open to us.

“Of course, redistribution will always remain necessary. But we’ve learned that it is not sufficient…. We need to care about pre-distribution as well as redistribution.

“Pre-distribution is about saying: We cannot allow ourselves to be stuck with permanently being a low-wage economy. It is neither just, nor does it enable us to pay our way in the world. Our aim must be to transform our economy so it is a much higher skill, higher wage economy. Think about somebody working in a call centre, a supermarket, or in an old peoples’ home. Redistribution offers a top-up to their wages. Pre-distribution seeks to offer them more: Higher skills. With higher wages. An economy that works for working people.”

When pressed for an example of how this works, Ed gave the example of Labour councils that have used procurement policy to pay the Living Wage.

This is important stuff and it deserves a trade union response.

First, on the specifics, it is excellent news that Labour is considering using procurement for wider economic and social purposes. The last Labour Government, with the honourable exception of Angela Eagle during her period as a Treasury Minister, failed to spot the potential of this, in spite of some heavy trade union lobbying at the time. Chuka Ummuna, the Shadow Business Secretary, has moved this policy on and this is an important development.

More generally, the idea of pre-distribution is sound, but more thinking will be needed about how it can be made to work in practice. More and more people are citing the problem of income inequality – Richard Lambert, the former Director General of the CBI highlighted this as a major problem in his remarks yesterday – but highlighting the problem is not the same as finding a solution.

A number of contributors at yesterday’s event argued that, for a fairer wage distribution, there was a need to increase collective bargaining. First Liam Byrne and then Ed Miliband made the point that unions are important, but if they are to exert more influence, unions need to get out there and organise more.

And so we do. Our General Secretary designate, Frances O’Grady, shows no illusions about the scale of the challenge, in her article for today’s ‘New Statesman’. In spite of the fact that we continue to represent more than six million people, Frances writes that “fewer than one in seven private sector workers is now a union member” and concedes that “the higher our membership, the better we can represent working people, their families and communities”. She adds that “it is the reduction in the need for employers to hold themselves to any account to their workforce that has done most to drive inequality.”

This is important. Democracies are made up of a set of institutions that provide checks and balances, in order to hold each other to account. I have very little time for much of the tabloid press, but I recognise that a media free to criticise is indispensible for democracy. Likewise, an independent judiciary.

This is why in the Nordic and German speaking countries, trade unions are accepted and welcomed as an essential counterweight to the overweaning power of employers. Earlier this year, the TUC published a report called ‘German Lessons’. This report was concerned with industrial policy and sought to understand how the German Government and wider society supports its industries, to such good effect. The purpose of the report, of which I was the author, was not to look at the German Social Market Economy. But it was impossible to look at the giants of German industry, such as Volkswagen, Siemens and BMW, without putting them into a wider socio-economic context. The Social Market Model has been under attack in recent years and it is important not to be complacent, but it has delivered a mutuality and greater equality that is widely prized in German society.

If the Coalition Government lasts the course – admittedly highly uncertain – Ed Miliband has another two years to flesh out the details of his better capitalism agenda. Ed must know that the problem of income inequality will not be solved through employer philanthropy and that avenues like procurement policy – important avenues that the TUC will support – are not enough. So what role does he see for trade unions in a better capitalism model? Is it simply our job to go out and recruit more people, or do politicians, businesses and other civil society institutions need to try to engage with us in a different way? We know that trade unions are able to operate differently when we are welcomed as partners, so how can a Labour narrative spread that idea? And if Labour were to do that, what challenges does Ed have to offer us in return?

This is a debate worth having.

Written by Tim Page

I’m a Senior Policy Officer at the TUC, responsible for economic and industrial policy. I also cover science policy, public procurement and high performance workplaces. I started my union at the Amalgamated Engineering Union, which is now part of U…

3 Responses to Pre-distribution and the role of collective bargaining

Whilst applauding the fact that some politicians are finally recognising the importance of more equal pay distribution in economic growth I hope that Ed Miliband is prepared to follow this line as far as it is possible to go and it is not simply soundbiting whilst the country concentrates on Osbourne and his desperate policies for growth lucky-dip. And let us hope that the unions can stop bemoaning their lack of membership long enough to actively promote themselves as credible defenders of the working classes of all pay grades, and their economic environment. Perhaps the 20th October march can be just the platform to really hammer home these ideas.